QuickBooks Inventory – Part Three – Using Purchase Orders

Posted by on Apr 19, 2011 in Inventory Module | 27 comments

If you’re not using Purchase Orders my question would be – why not? Granted, if your business is very small at this time and your orders are minimal, then you may have a point. But being an optimist, it’s going to grow so you might as well get used to the benefit now.

Purchase Orders are used to purchase items or in this case inventory from your suppliers. Not only does it start the correct procedure for tracking but it also adds a control factor in your accounting.

Speaking of accounting, once you create your first Purchase Order , QuickBooks will add a Purchase Order account which is a Non-Posting Type. That means the Purchase Order account will not have any impact to your Balance Sheet or Income Statement. Just think of it as a quasi clearing account.

Once you receive the items in full the Purchase Order will be Closed, and will have no further use except in Reports.

You will be surprised how receptive your suppliers are because it makes it easier for them to track and ship an order. On your side, you will know what the total cost will be and the quantity that is going to be shipped or backordered, before you receive the official bill.

Since I made the Inventory and purchase orders active in Preferences, and continuing on with the sample company, I will guide you through the creating of a purchase order.

Starting from your Home screen the Purchase Order icon should be the first icon in your Vendor section. Upon opening this screen you will realize that it looks very identical to Create Invoice.

I am going to add the following into these fields: Template – I need to make sure to use the correct Template which is this case is called Custom Purchase Order. VendorBarata’s Building Supplies and Date– the current date that is appropriate. QuickBooks will arbitrarily place the next sequential number in the P.O. No. field and in the Ship To address field, I will key in the address if different from the last site that was used.

Tabbing to the Item field I will select Exterior Materials: Exterior Frame, Qty field 10, and my message in the Vendor message field – Please rush ship this order. To save this I will click on Save & Close.

Your purchase order should look like the example above.

You will notice in the example that their is a Customer field in this purchase order. This could be used if  the material was going to be used in a Job. It could later be added directly into a Customer Invoice.

I mentioned earlier about purchase orders and Reports. You can view any or all purchase orders as an Account QuickReport or go to Reports and pick out any of the six Purchases reports that you may need.  Since I just created a purchase order, let’s go have a look at the Open Purchase Orders Report.

I can either go to the Report Centre or use Reports from the Menu Bar at the top of the page. I’m going to use Reports from the Menu Bar/Purchases/Open Purchase Orders.  You will notice in this example the three purchase orders that are still open, which includes Number 10 which I just completed.

Next up will be Receiving Inventory.

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27 Responses to “QuickBooks Inventory – Part Three – Using Purchase Orders”

  1. DHunter says:

    I have a middle man business, ie. buying and sales of engg/steel goods items. While creating PO, to what Account should I associate my Item Type? Since it is Purchase Order, I thought the appropriate Account would be Accounts recivables, but it would not allow me to select that?
    Also what would be the appropriate Type for such Engg/steel goods?
    Please help me.

    • Larry Johnson says:

      When you create a PO in QuickBooks it books the transaction to a non-posting accounting so you do not have to set up an account. If you’re speaking of your engg/steel item that you re-sell, than it would be a Service or Non-Inventory part Type account. Besides the Account field near the bottom of the New Item screen, point that to an Income account.
      You can also find the information you are looking for on my site by doing a Seach for Items or How to Set one up.
      Hope this helps.

  2. We are custom making furniture and we are facing some problems as I can’t open a purchase order based on BOM items automatically. I have been informed that you need to have inventory before this can happen

    my example is we buy a chair frame from vendor 1
    We spray the chair frame with vendor2
    We upholster the chair frame with vendor 3
    We purchase upholstery materials from vendor 4

    We do not stock any items as we are only custom making hence this is a huge problem for us as we want to get around this so we can automate this process
    Further to this we want to have images on all our purchase orders, sales orders etc for easy reference

    We are about to purchase the latest version of QB enterprise, but this is a huge problem



    • Larry Johnson says:

      Hi Peter, this is difficult to answer without looking at your company file to see how your items are setup. But since you say you do not stock any items, thus have no inventory per say, here’s the definition of a non-inventory part.
      These are items to track merchandise that:
      -You purchase but do not resell.
      -You sell but do not purchase.
      -You purchase and resell but do not stock in inventory or track as inventory.

      You may have set up these items as inventory part instead of NON-INVENTORY PART. QB’s does not track a Non-inventory part except for its cost and revenue (sales), and therefore should not interfere with the processing of a Purchase Order.

      My other thought with your problem would be to run a data integrity check to see if you have any data errors.

      If you have set up these items as an inventory part by mistake, then you could export the Item list, change the Type to non-inventory, and import it back into your company file.

  3. I create a “Purchase Order” for a specific item and enter 500 pcs, I enter in “Receive Inventory” that I received 400 pcs. In Iventory Item Report, how come it shows a total of 900 pcs? That quantity does not exist. Only 400 pcs of 500 pcs ordered were received.
    Please help!

    • Larry Johnson says:

      Sorry, I can only help you if I’m able to see your QB screen to understand how you have set up your Inventory, which would be by QB Remote Access. That is provided with a cost per incident or by the hour if it is more than 30 minutes. Try the QB Community online.

  4. My company is a logistics company.

    We do transporation and labor for Tradeshows.
    So, if company A is having a show and on..
    Oct 1 Vendor 1 transports 1/2 of their product to the show and on
    Oct 4 Vendor 2 transports the other half to the show
    and in the customer field we put in Company A.
    That ties it to that company.
    Company A has 20 shows a year.
    So how do I tie it to just that job so we can see our profit and loss on each show?
    We’ve thought of adding the jobs under the company but I thought there were only 10,000 Customer/jobs you could have, isn’t that right?

    • Sorry, Oct 1 & 4 are two different PO’s

    • Larry Johnson says:

      Hi Jessica, actually 14,500 for your Customers. You’re on the right track as far as tracking your shows costs, as they would be set up as jobs. Depending on what you are marketing you could also use your class as a way of keeping track as you could match revenue with costs and print out a Profit & Loss for each individual class.
      Hope that helps.

  5. Hello,

    We are working with canadian version, qck entreprise 2013 and we would like to work with PO to track inventory. Here is our situation: When I order parts, I have to make a deposit (partial payement), how do I do that without receiving the items? Also, my other problem is that this bill should not be an expense until I receive the goods.

    Thanks for your help.

    • Larry Johnson says:

      Hi Chantal. Unfortunately I don’t do any reponses to accounting matters as this is too complicated without being able to look at your company file. Alas, as I do not knowing the structure of your General Ledger accounts, it would be unprofessional of me to give you advice. This is a matter to be discussed with your accountant who knows your business and your general ledger accounts.

  6. Chrissy says:

    I am an accountant and working with a client who uses the PO system. I am not sure of the back end posting of purchase orders. When a PO is created the items are not included in any account except the non posting account, so if there are PO’s still open from years past I will be able to delete them without effecting any of the financial or inventory information?

    • Larry Johnson says:

      Hi Chrissy, You are correct in that the PO is booked to a non-posting account in QuickBooks. Until the Inventory is received and the PO closed, no accounts are effected. Hope that answers your question.

  7. hi sir,

    i create quick books new file, regarding the home page i didn’t find the purchase order icons & i want to know how to create the purchase order file in quick books.

    Rely me.

    • Hi Mohamed, you need to got to Edit/Preferences/Items & Inventory/Company preferences and click on the box beside the >”Inventory and purchase orders are active”, and then OK. Hope that helps.

  8. Can you please tell me how to break out the items received from a single PO to multiple vendor invoices? When I go to pay bills and select my PO, QB puts all its items into a single bill, but the vendor has sent me multiple bills. I don’t see any way to delete received items out of the QB bill. What should I do?

    • Hi Kathryn, this is a very messy way to process the PO’s. They are meant to be individualized to each Vendor. in the PO you can select which items you want to receive. If that does not work for you Delete the single PO and set up multiple PO’s for each Vendor. Remember, a PO is a non-posting item until received, so it you have not received it and/or closed the PO, then you can delete it and start fresh. Are you using Inventory Control and which QB’s are you using?

  9. For several years Our company have been entering items incorrectly as inventory items when should have been entered as Non inventory. We have a serious inventory problem with some items showing we have items in stock and some showing we are in the negative. How can this be corrected without causing a problem with previous closed year ends? And what should be done with these Inventory items that have been created? Can they be deleted or just need to be made inactive?

    • Hi Deanna, you have a very complicated case here. In QB you can not go back and change the inventory item. So, the first thing you need to do is take Physical Inventory count. Then you need to setup the new and correct non-inventory items. Since you haven’t mentioned your type of industry it is tough for me to clarify what else you need. But, in Inventory you can make Adjustments based on your Physical Inventory count. The Inventory items that have been incorrectly created need to be made inactive, so that they don’t mistakenly get used. If the fiscal year has been closed off and the tax return filed, I would make those changes based on the first day of the new fiscal year. All of this will have an impact on several accounts that are part of Inventory Control such as the Asset account, Cost of Goods account and whatever account you are using to make these adjustments. Once again, since this is a very complicated process I would Google for a QB ProAdvisor in your area and have he/she visit you. Make sure they have experience in Inventory and accounting knowledge.

  10. I am wondering how to create an invoice for resale from non-inventory parts I purchased with a PO#. Can I link the invoice with the PO#?

  11. We started using purchase orders and they aren’t posting to the non-posting account. They are hitting the Inventory Assets on the balance sheet and I can’t figure out how to change this. Any ideas?


    • Hi Jeannie, I need some more info to answer your question. Like, what version of QB’s are you using? CDN or US? Desktop or Online? Then I can understand what’s happening.

  12. Hi,
    When I enter items and quantity to Purchase Order, I have to type the whole description and the price rate of the items every time. Is there anyway to just type few first letters of description and then it will automatically appear the whole description and the price for that item?

    • Hi Le, you should be able to enter the beginning of the Item name which should bring up some descriptions to choose from. The Item name is what the Description field is connected to, not the other way around.

  13. Hello,

    Sometimes we create purchase order for items but we are not being charge for them by our vendors since we use this to create some samples. How can i close the purchase order to not apper open any longer but I also would like to see this items on the job report is there any way to do this.

    I try just closing the purchase order but this does not show in the job report. Thank you in andvance!

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